More Than a Hole in the Wall: The Unfulfilled Potential of the ATM

Examples from around the world show how U.S. banks can turn the ATM into a valuable tool in reaching out to new customers if banks invest wisely in the channel.

There is no arguing that traditional financial institutions (FIs) are chasing innovation in an attempt to keep up with all the new and dynamic players in the market. But are they doing so at the risk of leaving other seemingly more standard channels behind? For instance, the humble ATM. Diebold reports that the U.S. is the largest ATM market in the world, processing $14 billion in cash transactions each year. While it seems that a channel with this much usage would be a high priority in technology budgets, the opposite is true - according to Aite Group, 18% of U.S. banks have ATMs that are 10 years old or older.

Celent predicts that annual IT spending by FIs will increase to nearly $57 billion in 2013 – a four percent increase on the $54.7 billion spent last year. A large chunk of this investment will be dedicated to newer channels, such as online banking and mobile apps. For example, in 2012, investment in mobile banking alone was an estimated $3.3 billion (Ovum, 2012).

ATMs are often forgotten or ignored when it comes to innovation, but it is time for FIs to leverage this already well-established channel to fulfill its full potential. While the most significant change that has happened to U.S. ATMs recently is the proliferation of ATM check capture, FIs in Europe and Asia have focused on the channel as an important part of their client service efforts. These organizations realize that mobile banking and other new self-service payment channels are growing in popularity because they provide consumers with a convenient and fast way to bank. They alleviate the need to stand in line in a branch and allow consumers to bank on their own hours.

ATMs offer these same benefits and can be utilized to expand a bank’s self-service product offering. The channel should be an important part of an integrated, unified multi-channel customer experience - not left out of product roadmaps and budgets. This channel is set-up and ready to go and with a few tweaks (that could be made as part of your EMV roll-out strategy), you have the opportunity to considerably improve your customers’ experience.

Learning from International Crowd

ATM innovation has quietly gathered pace in numerous markets around the world. Advances in this space have led to a complete overhaul of self-service banking that enables users to complete a wide array of functions that other channels simply cannot reach. Enhancement opportunities include:

• Virtual Prepaid Cards: Any consumer can create a virtual card by either loading it with funds from an existing bank account or inserting cash into the ATM where available. The customer prints a receipt that displays the number of the virtual card and all the details needed for online purchases. These cards are a valuable tool to reach the underbanked as you do not necessarily need to be a customer of the bank, or for those consumers wishing to avoid Card Not Present fraud.

• P2P Cash Payments: Mobile and ATM technology allow customers to arrange money disbursement for friends and family. A customer selects the option at the ATM, and enters the amount and the mobile number of the recipient. The system then sends a code in two parts: one part is printed on the ATM receipt and the other is sent by text to the payee. The code allows the recipient to collect cash from an ATM.

• Internet Connectivity: Customers can access their online banking accounts at the ATM and complete transactions such as fund transfers and bill pay. They can also purchase products and services such as event and lottery tickets from organizations affiliated with the bank.

• Loan Applications: Customers can apply for loans at an ATM and receive the bank’s decision via SMS within an hour. The customer then signs a loan agreement and receives a barcode to scan at an ATM along with a PIN via SMS which is entered at the ATM together with the barcode scan in order to receive cash. The recipient of the loan has seven days to withdraw the cash as either a lump sum or gradually over the stated period. The loan applicant does not have to be an existing bank customer, enabling FIs to tap into the underbanked segment of the market.

• Donation Acceptance: During disasters and other times of need, ATMs can serve as an automated hub for donation acceptance by enabling community members to give money through the ATM network. U.S. Bank recently demonstrated this functionality through a donation drive for those affected by the Oklahoma tornadoes.

• Currency Exchange: Customers can withdraw popular foreign currency directly from the ATM without needing to go to a teller. They can choose from conversion rates provided by their card issuer and the acquiring bank, ensuring they get the best deal possible. Some ATMs also allow customers to deposit and change their foreign currency back into domestic currency.

Attracting New Customers Through Better Service

By building out ATM functionality, FIs can help customers fulfill almost all of their banking needs without involving an actual teller. Institutions can also leverage ATMs to improve cross and up-selling opportunities by integrating targeted marketing messages based on the customer’s actions at the terminal, as well as in response to the specific payment card being used.

One of the key underused advantages of ATMs is that they can be a powerful selling tool to your competitors’ customers because they are the only channel that non-account holders will interact with. In fact, should a customer from a competitor bank use your ATM, a completely separate scenario can be run to help entice them to switch banks. A recent World Retail Banking report cited quality of service as the main differentiator for customers when choosing their financial services provider. By impressing potential customers with their ATM experience, your bank can attract new account holders.

ATMs are still a valuable tool for banks. They are becoming increasingly intelligent and, when included in a unified multi-channel strategy, can play a major role in customer service and growth. It is yet to be seen if we will become a truly cashless society, but for the foreseeable future consumers will continue to rely on ATM and herein lies an often ignored opportunity.

re: More Than a Hole in the Wall: The Unfulfilled Potential of the ATM

Theoretically, an ATM is a cash dispensing computer, change the key board and it could do anything and everything that the bank allows thru Online banking (at a minimum). BUT, queuing could become a problem. 2 ATMs, 2 people opening accounts, 15-20 minute transactions...the line would be around the bank. So the bank needs to balance what can be done, with what should be done at the ATM. But, I do agree that a lot more things could be done.

re: More Than a Hole in the Wall: The Unfulfilled Potential of the ATM

A lot of interesting use cases here, especially with the virtual prepaid cards. Seems like an easy way for banks to be aggressive in the prepaid market where they face a lot of competition from non-banks.